The Insurance Process for Sports/Recreation Organizations

The risk management decision-making process

Many sports and recreation organizations and their insurance agents make the mistake in their efforts to find the least expensive insurance carriers: they concentrate primarily on the insurance bidding process. Unfortunately, this single-minded pursuit ignores or only pays lip service to the traditional risk management process and actually raises the cost of risk over the long term. Insurance agents and carriers are the primary providers of risk management services for sports organizations, as most can’t afford a full time risk manager on their staff. The long-term cost of risk and insurance can be reduced to the greatest extent only when qualified insurance agents implement the following risk management process:

Identifying exposures to loss of property, net income, liability, and personnel. These exposures should be identified through a review of historical loss data of the sports organization, loss data of similar organizations, surveys/questionnaires, financial statements, inspections, interviews with management, and interviews with outside experts.

Analyzing threat levels in terms of frequency of loss and severity of loss. The threat level should be measured by those that interfere most directly with the sports organization in terms of income, growth, continuity of services or operations, and humanitarian goals.

Prioritizing treatment for those losses that pose the highest threats. Sports organizations should spend the most time and money addressing the potential causes of loss that could have the biggest negative impact.

Applying risk control techniques that key in on preventing or reducing actual losses. Examples include avoidance (ex: use of 15-passenger vans, overnight sleepovers), loss prevention (ex: criminal background checks), loss reduction (ex: mandate safety equipment), segregation of loss exposures (ex: set up separate entity to hold scholarship funds), and contractual transfer for loss control (ex: subcontract out risky activities such as transportation of participants, serving of liquor, or fireworks).

Applying risk financing techniques that key in on figuring out the best and least expensive way to pay for losses that can’t be controlled. Examples include retention of losses (ex: paying smaller and/or predictable losses out of funded reserves or under insurance deductibles) and transfer through the purchase of insurance or the use of contractual transfer for risk financing (ex: waiver/release, hold harmless/indemnification provisions).

Studying and preparing for emerging risk issues such as advanced concussion diagnosis and treatment, updated CPR techniques and AEDs.